Cole concludes

The Cole Commission has finally reported, and I can take some comfort from the fact that my predictions at the start have been borne out almost entirely.* No conclusive proof of government wrongdoing has emerged, no minister has resigned, and the government’s defenders have had no trouble squaring their denunciations of Saddam with the fact that we were financing his rearmament program up to the day the war began.

Only the last of these points really mattered, since it called into question the whole rationale for our participation in the war, and the good faith of those who urged. But now that the war is almost universally recognised as a disaster, this probably no longer matters. Even for those who justified the whole deal on the basis of commercial self-interest, it should be clear by now that we have lost any positive standing we had in the world wheat market and that the US will be able to lock us out of many markets we might otherwise have competed in with success.

For those who want more, though, occasional commenter Stepehn Bartos has produced a book called “Against the Grain – The AWB Scandal and why it happened”. It is published by UNSW Press in their briefings series, can be ordered online at www.unireps.com.au. He says

The book goes beyond the Cole Inquiry concerns of who did what when, and instead looks at the underlying causes of the scandal including inadequate due diligence at the time of AWB privatisation in 1999, poor design of regulatory supervision, and most importantly, the fact that Ministers and AWB officials were all part of the same small, closed circle and not inclined to ask questions even when information alerting the government to the possibility of the kickbacks started to come out.

It sounds like a substantial effort, given the short time, but of course many of the fundamental issues have been familiar from previous episode.

*The only point of disagreement is that Cole and I apparently differ on epistemological questions. In my view, if you are told ‘P is true’, P is in fact true and you have no good reason to disbelieve P, then you should be presumed to believe P and therefore to know P. Cole, perhaps more conventionally thinks that if you choose (or claim to choose) not to believe P, then you can’t know P. Thus, even though the government was told on many occasions that AWB was bribing Saddam, knew that Saddam was exacting bribes on a large scale, and had encouraged AWB to do ‘whatever it takes’ to sell wheat, by choosing not to believe the facts placed before, it avoided guilty knowledge.

I don’t suspect too many people expected government heads to roll. However, a possible unexpected fallout from the Inquiry could be a bit of back-of-mind electoral backlash against John Howard’s over the top claims of rosy smelling purity. It’s a fair bet a good many people have got the fact Howard set up the terms of reference (though hard to really know out there in the land of the disconnect); regardless, even the most politically disconnected don’t buy the line that politicians are honest.

Wilson Tuckey’s responses today were all rather strange, too.

It will probably all whither away, however, if there are going to be political repercussions, these seem likely to arrive from unforseen developments.

The nett result, though, is a very great shame to Australia. Things like this cut through in quick international terms and leave a very nasty smell about us. Our current government must take responsibility for this, lest it be accorded it and us in terms beyond our control. It could get passed off overseas as very ugly indeed.

“past experience of the operations of this government yielded the following conclusions

* Both Downer and Howard knew that the AWB was paying kickbacks to the Iraqi regime

* This information was transmitted in a way that preserves deniability, so no conclusive proof will emerge”.

Cole concludes that the first dot point is false. You claim is that in principle it could not be shown false because of the second dot point.

What if (as I am fairly sure is the case) you are just wrong and your claims about Downer and Howard are false? What sort of evidence could I collect to demonstate to you this falsity? The answer is that I couldn’t provide anything to prove it if you insist on the second dot point. To my way of thinking your claim about Howard and Downer is empty and unfair.

How do you know the claim made in your second dot point is correct? How can it be more than a guess?

Prior form, Harry. We know from past experience that the suspect wears gloves. Surprise, surprise, there are no fingerprints at the current crime scene. There’s not enough evidence to convict, but that’s not the same thing as a proof of innocence.

Harry, Howard and Downer were informed on numerous occasions of AWB’s crimes, and chose to ignore the information. The people committing those crimes were the government’s close political allies and were lavishly rewarded for their success in selling wheat to Iraq, something that (as everyone knew) could only be done with bribery and corruption. Can you explain the interpretation of “know” under which they did not know what was going on.

As regards your question, point me to evidence that the government demanded access to AWB records that would have determined the question one way or the other (and we now know which way).

harry, one of the relevant questions is not just whether but when did Ministers know. It is clear from evidence provided to Cole that Ministers did know about the kickbacks much earlier than was revealed to the public: the Iraq taskforce gave them the information (records from that were part of the evidence to the Inquiry). From the DFAT 2002-03 annual report “The task force secretariat produced concise situation reports for ministers and other agencies, initially three times a week, rising to a peak of twice-daily reports. By 30 June 2003, 185 such reports had been prepared.” These it now appears included material on the Iraqi documents found post Gulf War 2 that revealed rorting of the oil-for-food programme (the same information that led to a US and a UN inquiry). It took Ministers a long time to let the rest of us into the secret. This did not come under the Cole terms of reference because he was only looking for evidence of illegality (keeping the public in the dark does not count as illegal).

On the question of whether Ministers knew in the period 1999-2003, Cole found no evidence that they did. But nobody actually expected him to. Even if Ministers actually knew, the experience of other recent ministerial failings suggests that there would be no documentary evidence. I suspect however they never even got close to receiving formal briefing or information on the kickbacks via AWB or anyone else, and although they might have had plenty of warnings or indicators, they chose not to take those seriously. Ministers would have been able to uncover the kickbacks had they commissioned an investigation, but that wasn’t something that occurred to them – they were too keen to believe AWB denials. This is not quite the same as a supposition that they actually knew; and the question of whether they, their offices and their officials ought to have been more sceptical and rigourous fell outside Cole’s ambit. One interesting question is whether they had tacit rather than explicit knowledge – but if you read the Cole inquiry report, you will see that he was very much a “hard evidence” sort of commissioner, and in the absence of such evidence he was not going to make any findings of illegality: I don’t think tacit knowledge would really have occurred to him. My book, which John has kindly mentioned, suggests that the underlying reason why Ministers did not want to ask hard questions was because AWB and the relevant Ministers were all part of the one intimate, closed policy community.

Not yet, in any case. Let’s see what evidence emerges when all those AWB executives go on trial. These guys might have a few things to say about who knew what and when they knew it. If they are going to go down I reckon they will be in a mood to take a few with them. They are not just facing the prospect of jail time but financial ruin as well. With Cole finding adversely against them they will have to pay for their lawyer’s fees during the Royal Commission out of their own pockets (AWB’s D&O insurance won’t cover them) and then there are the lawyer’s fees for their own trials and the avalanche of law suits that will come their way from AWB shareholders, American farmers, Canadian farmers and a whole lot of others.

John, I assume the government and DFAT hear claims of corporate and public sector misconduct daily. The issue is whether there was evidence or reasonable grounds for assuming something was rotten. There was something rotten going on but Cole concluded that there was no evidence that either DFAT or the government knew or ‘turned a blind eye’ to what was happening.

PPart of the reason I think this is so was that AWB had very high (and unjustified) prestige. Hearing stories of successes in achieving strong wheat sales might confirm that impression particularly if the criticisms of AWB are coming from its North American competitors.

Stephen and SJ, Your claim seems to be based on the idea that the government can be assumed to be dishonest because you claim it was dishonest in the past. The Cole inquiry will never make you happy if you want to convict the Government on this basis. Indeed if you believe this is the case there is no reason for Cole – they are guilty without inquiry.

The same is true of John’s requirement for proof of innocence – they should have unearthed the offences. Again no reason for an inquiry just convict day 1.

It would be interesting to know how much was paid in bribes prior to the formation of the curent AWB, there may be a long history of bribes having to be paid to secure export markets in grain and other commodities.

“It would be interesting to know how much was paid in bribes prior to the formation of the curent AWB, there may be a long history of bribes having to be paid to secure export markets in grain and other commodities.”

Indeed this is so, which is one of the many reasons why the direct accusation of the Canadians that they had been shut out of the Iraq market for refusing to pay bribes was, at least prima facie plausible. Anyone who regarded Saddam as an evil and dangerous dictator, or who was aware that they would soon be fighting a war against him, ought to have investigated this accusation.

The best case you can make for the government is that they planned to have two-bob each way, bribing Saddam as long as he held on, then sending troops (hopefully for a very brief stay in a low-risk location) to establish a case with the Americans for a share in the spoils. War supporters are apparently happy with this, but they ought to be unhappy about the fact that having paid the bribes and sent the troops we are now set to lose not only the Iraq market but any other market where there is a potential premium to be had.

I think that to be fair we could broaden the issue to bribes to all exports.

You’re not going to like the results.

Want a container unloaded at Jakarta? That’ll be $10 for the crane operator, $20 for the foreman.

Want to sell electronics in Egypt? That’ll be $10K for the trade minister and $5K for each of his two brothers, one of whom happens to be an MP, and $100 to the Port Authority wallah for each container unloaded at Suez.

How about selling mining equipment in Zambia? Better extend that overdraft.

harry, you may not have read my post before you made your comment, or perhaps I was not direct enough in my language. I don’t assume the government was dishonest. I rely on the facts. The government did know there was evidence of kickbacks many months before announcing it publicly (that’s on the record at Cole). It did have warnings passed on in cables from DFAT that there were suspicions of kickbacks. It never launched an investigation. So there is no doubt, my view on the basis of the evidence to date is that the government almost certainly did not explicitly authorise AWB payment of kickbacks. It may or may not have known about them prior to 2003, but there’s just no evidence.

rog: there’s little evidence that there were lots of kickbacks paid prior to the current incident, and indeed there have been claims to the contrary by among others Clinton Condon, former chair of the Australian Wheat Board. where does the Australian xenophobia come from that assumes everyone we deal with overseas has to be venal and open to bribes? Its just not the case.

Nearly every country and many companies have been involved giving and taking of bribes, Fonterra, Volkwagen and Mercedes to name a few. Whilst it is relatively easy to monitor in developed countries it is more difficult in the developing world, whilst some effort has been made by the OECD to deter bribery of public officials bribes and corruption remains a serious global issue.

Based on JQ’s past left-leaning tendencies – it is possible that he was in fact the ring-leader of the recent violent G20 ‘rent-a-mob’ clashes in Melbourne. However, there is no conclusive evidence of this fact – perhaps because JQ is a smart guy and ran the show in a way that would not leave any trail to him.

You can be cynical all you like about the efficacy of government inquiries – but in our society we base our law on ‘innocent until proven guilty’, but I guess that doesn’t apply to government???

“but in our society we base our law on â€˜innocent until proven guiltyâ€™, but I guess that doesnâ€™t apply to government???’

Certainly that hasn’t been our tradition. The view until recently was that, if something wrong was done by a government department, the Minister took responsibility. Now unless it can be proved that they directly ordered wrongdoing, they are in the clear.

PrQ,
There are always going to be disputes as to who knew what, when and who should have known what and what they should have done about it.
In this case the question, to me at least, is an uncertainty as to the role of DFAT. Cole appears to be taking the line that DFAT was correct as acting as a post box for forwarding the reports to the UN and had no real role to take on in investigation once questions were raised by others, particularly as they were raised by companies with a vested interest in smearing (or, as it turned out, telling the truth about) AWB.
Clearly, if DFAT had an investigatory duty as regard corruption then it would have to have been counted as failing in that duty. If it has no such duty, then the Minister would have nothing to resign over.
I have seen nothing that indicates they had that duty.

“Clearly, if DFAT had an investigatory duty as regard corruption then it would have to have been counted as failing in that duty. If it has no such duty, then the Minister would have nothing to resign over.”

So, if an allegation of corruption is made (and it’s hard to imagine a more serious one than paying hundreds of millions of dollars of stolen money to Saddam Hussein) is it your view that DFAT has no duty to investigate it? If that’s your view, is there an obligation to seek an investigation by some other body? Or is it OK to ignore it, as was done?

Like any other decision, PrQ, you have to do an assessment of the risks involved, which must include an assessment of the reliability of the source, the target and the circumstances. With hindsight, it is fairly easy to see they should have referred it to the AFP. Foresight is less certain.
If their assessment was that the corrupt behaviour had not reached the top of AWB, but was confined to lower level people, then the approach to the senior people in AWB would have been appropriate – inform them of the allegation, allow them to investigate and come back with a report. This is how regulators often work in these matters – provided they believe the people at the top are fit and proper.
In this case it certainly appears as if that assessment was incorrect (we should wait for any prosecutions to be sure), but if DFAT do not have an investigatory arm this would be about as far as I would normally say it should be taken, again, with the provision above. DFAT is not a front line regulator (or police force) and should not be expected to behave like one.
That said, I think their procedures will change now, though.

I will give an example. When APRA were informed of possibly irregular dealings at the NAB, one of the first things they did was to contact the CEO and inform him. They also wrote to the Board informing them of the concerns. They also made an internal assessment of the risks and wrote up a file on it. That was all they did – they did not (correctly, IMHO) see their role as getting to the bottom of every allegation from institutional competitors that came across their desks. They trusted the internal mechanisms of the bank to deal with it. That is the reaction of a front line regulator. To expect more from DFAT is, IMHO, unrealistic without there being a specific requirement for them to investigate allegations like this.
One of the real pities out of this is that DFAT may now over-react and see its role as investigating the cr*p out of every allegation that comes across their desks, causing still more regulatory overkill and hurting our import and export performance.

Andrew: it would have been a better outcome had DFAT had done those things (ie contact the CEO and inform him, write to the Board, do an internal assessment of risks and write up a file). Andrew Lindberg (AWB CEO) is not on the Cole Inquiry list of those recommended for further investigation because he claimed – and it would seem Cole believed him – that nobody had told him.

I’s so bored by all this breast-beating over the AWB. Of course they paid bribes, but the US Govt. itslef rorted the oil-for-food program on a far grander scale than did AWB, as I pointed out here,and now they and American farmers have the gall to point the finger of accusation at us. I think an elevated middle finger is the only explanation we owe them.